#AVALANCHE #AVAX #TraderJoe #JOE #DeFi
Over the past 2 weeks, the price of $JOE, which is the native token of the decentralized exchange Trader Joe skyrocketed, doubling from $0.227 to $0.5377. Its daily trading volume also increased significantly, peaking at $148.74 million around all platforms. Traders and analysts believe this price increase may be related to Trader Joe taking a large share of the $ARB trade from Uniswap.
Trader Joe V1 and Early Development
Trader Joe, was first created by anonymous developer 0xMurloc, launched in July 2021. It soon closed $5 million in funding in September of the same year from Avalanche Foundation, Delphi Digital, Coin98 Ventures, DeFiance Capital, Aave founder Stani Kulechov, and many more investors.
Similar to decentralized exchanges such as Uniswap, Sushiswap, Trader Joe is based on the traditional “x*y=k” design, and liquidity is evenly distributed across the price curve. It also offers token exchange, leveraged trading and staking, and farm services with its native token $JOE. Trader Joe has a transaction fee of 0.3%. Of this, 0.25% is allocated to the liquidity provider and the remaining 0.05% is allocated to the $JOE token farm.
The first version, Trader Joe V1, was originally deployed on Avalanche. The overall liquidity pool volume surpassed $40 billion on Avalanche by the end of 2022. And it was later considered the as the “Uniswap” on Avalanche.
Launch of Trader Joe V2
As DeFi evolves, Trader Joe sees an urgent need for improvement in the v1 version in terms of capital utilization and liquidity flexibility. As a result, Trader Joe V2 was announced in August 2022. To improve capital efficiency and reduce LP impermanent losses, the Trader Joe team designed V2 to introduce features such as a “liquidity book” for concentrated liquidity and a “variable fee” that adjusts to market fluctuations.
While a traditional AMM pools all assets offered against a specific token pair into one pool, Trader Joe will divide the liquidity pool into price bins, which is similar to tick in Uniswap V3, creating multiple separate bins with different prices. The concentrated liquidity. allows liquidity providers to get more fees for less liquidity. The team believes this design minimizes trading slippage, which means users will get better prices when trading and provides good trading strategies for LPs. The concept of bins to allow concentrated liquidity. Each ‘price bin’ is a pool with a fixed price and a ‘constant sum formula x+y=k’. Then the ‘liquidity book’ aggregates the liquidity of all ‘price bins’, i.e. ‘discrete centralized liquidity’. Once the liquidity of an “active bin” is completely depleted (containing only one asset, Token X or Token Y), the bin will be inactive, and the neighboring bins are activated and the current market price acts accordingly. Since the bin uses the “constant sum formula x+y=k”, there is no slippage as long as the trade uses liquidity within only one bin. The current market price varies only with the “activation state” of the “price bin”.
From Avalanche to Multi-chain
Even though there are many new DeFi protocols, such as GMX and AAVE, which are rapidly capturing market share, Trader Joe remains in the top 5 in the total value locked at $103.41 million. In December 2022, Trader Joe announced the deployment on Arbitrum testnet and officially launched on Arbitrum network in January 2023, which soon attracted over $30 million value locked. 2 months later, Trader Joe was launched on BNB Smart Chain, and is trying to challenge the leading DeFi protocol Pancake Swap.
Next Game Plan
Trader Joe launched its NFT marketplace “Joepegs”, as it’s trying to become a multi-dimensional product. But the Liquidity Book is the most direct reflection of Trader Joe’s choice of DeFi as its main focus. After all, DEX is Trader Joe’s largest “traffic portal”. The Liquidity Book is also a partial solution to one of the biggest risks faced by LPs in AMM DEX,and may be a way to minimize impermanent loss under normal market conditions.
Trader Joe shows its clear development idea: strengthens its traffic portal, improves its main product iteration, while expanding to other business areas to try to convert traffic, from DeFi to “big ecology” evolution.
*Risk Warning
This article represents only the views of the writer and does not constitute any investment suggestions.
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